Personal Finance
What to know about Harris’ affordable housing economic proposals
Democratic U.S. presidential candidate, Vice President Kamala Harris, speaks at an Aug. 10 campaign rally in Las Vegas.
Justin Sullivan | Getty Images News | Getty Images
Supply is housing policy’s ‘bipartisan sweet spot’
“The bipartisan sweet spot around the housing affordability challenges that we have today is on increasing supply,” said Dennis Shea, executive director of the Bipartisan Policy Center’s J. Ronald Terwilliger Center for Housing Policy.
Ever since the foreclosure crisis, a major period of property seizures in the U.S. between 2007 and 2010, there have been far fewer new single-family homes and multi-family rental buildings under construction, said Janneke Ratcliffe, vice president of the Housing Finance Policy Center at the Urban Institute, a non-profit think tank in Washington, D.C.
There’s “a more acute shortfall” when it comes to affordable homes, she said, whether for renters looking for quality rental units or first-time buyers looking for their first home.
To get to those 3 million new units, a Harris-Walz administration would introduce a “first-ever tax incentive” for home builders who build starter homes sold to first-time homebuyers, according to the proposals unveiled last week.
The initiative would complement the Neighborhood Homes Tax Credit, according to the announcement. A bill pending in Congress called the Neighborhood Home Investment Act, which would promote the creation and rehab of starter homes for sale in distressed communities, would create that tax credit, said Shea.
“It would create this tax credit, and that has strong bipartisan support,” he said.
My conclusion is that [Harris’] housing plan would be worse than doing nothing.
Edward Pinto
senior fellow and codirector of the American Enterprise Institute’s Housing Center
Former President Donald Trump has also talked about ways to increase housing supply as part of his presidential campaign proposals.
“We’re going to open up tracks of federal land for housing construction,” Trump said in an Aug. 15 press conference. “We desperately need housing for people who can’t afford what’s going on now.”
But Edward Pinto, senior fellow and codirector of the American Enterprise Institute’s Housing Center, said it’s “much, much harder” for the government to pass “supply-side proposals,” compared to efforts that generate demand by making homebuying easier for consumers.
“My conclusion is that [Harris’] housing plan would be worse than doing nothing,” he said.
‘It’s hard to define what a starter home is’
It will be important for Harris to clarify what she means by “starter home,” said James Tobin, CEO of the National Association of Home Builders.
“It’s hard to define what a starter home is,” said Tobin, as underlying costs make it hard to keep building expenses low.
“In most markets in the country, it’s hard to build to that first-time home buyer because of labor costs, land costs, borrowing costs for a builder, and then material cost,” he said.
Defining a range of price points for a starter home will also be important, as it may vary widely across different markets, said Tobin.
“In California, a starter home might cost seven or $800,000, but in the South … it might only be $250,000 or $300,000,” he said.
The $40 billion innovation fund seems ‘very high’
The list of Harris’ proposals also includes a $40 billion innovation fund. The money would empower local governments to fund local solutions to build housing, as well as support local solutions to build housing.
Yet some experts are skeptical it will fulfill the intended goal.
“The federal government doesn’t have a whole lot of authority over what happens at the local level,” said Fairweather. “It’s up to the local planning commissions whether they’re going to allow for more housing in order to get that [innovation fund] money.”
“But time and time again, locals and local governments, local homeowners ignore incentives because they’re so resistant to building more housing,” said Fairweather.
Additionally, the $40 billion housing innovation fund may be too high of a cost, making it unlikely to receive bipartisan support, said Shea: “I don’t know if the market could bear that price tag in Congress.”
Aid for first-time home buyers has less support
Harris hopes to provide $25,000 down-payment assistance to first-time homebuyers who have paid rent on time for two years, with more generous support for qualifying first-generation homeowners.
The proposal stems from an idea the Biden-Harris administration presented earlier this year, which called on Congress to implement $25,000 in down-payment assistance exclusively for 400,000 first-generation buyers (or first-time buyers whose parents weren’t homeowners) and a $10,000 tax credit for first-time buyers.
Harris’ blueprint would apply to all first-time buyers and broaden the reach to more than 4 million qualifying applicants over four years.
But “there’s just not a lot of bipartisan support,” said Shea.
During an Aug. 16 appearance on Fox Business, Sen. Tim Scott, R-S.C., said Harris’ $25,000 down payment assistance “will only make the demand higher with the supply not moving, which means that prices will go up, fewer people are going to be able to afford it.”
“And frankly, unless they’re going to embed financial literacy in any program, it only means there will be a higher level of default,” said Scott.
To help renters, Harris addressed two pending pieces of legislation. The Democratic presidential nominee called on Congress to pass the Stop Predatory Investing Act, a bill that calls for removing key tax benefits for those who own 50 or more single family properties. This initiative would curtail major investors from buying up large sums of single-family rental homes.
Meanwhile, the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act would crack down on companies who use tools to fix market rent prices.
Many Americans are starting 2025 a little worse off than before, at least when it comes to credit card debt.
Almost half of cardholders — 48% — now carry debt from month to month, according to a new report by Bankrate. That’s up from 44% at the start of 2024. Of those carrying balances, 53% have been in debt for at least a year.
Roughly 47% of borrowers said they carry a balance due to an unexpected or emergency expense, most commonly medical bills or car and home repairs. Others cite higher day-to-day expenses and general overspending.
“High inflation and high interest rates have been a nasty combination, and while the worst is behind us, the cumulative effects are significant and will linger,” Ted Rossman, Bankrate’s senior industry analyst, said in a statement.
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Overall, Americans’ credit card tab has continually crept higher.
The average balance per consumer now stands at $6,380, up 4.8% year over year, according to the latest credit industry insights report from TransUnion from 2024’s third quarter.
By way of example: With annual percentage rates just over 20%, if you made minimum payments toward the average credit card balance ($6,380), it would take you more than 18 years to pay off the debt and cost you more than $9,344 in interest over that time period, Rossman calculated.
Meanwhile, 36% of consumers added to their debt load over the holiday season, according to a separate report by LendingTree.
Of those with debt, 21% expect it’ll take five months or longer to pay it off, LendingTree found.
According to another report by WalletHub, 24% of Americans said they will need more than six months to pay off their holiday shopping debt. In that survey, most consumers said inflation caused them to spend more than they initially planned.
“Many people need months to repay holiday bills after overspending,” said John Kiernan, editor at WalletHub.
The best way to pay down debt
The best move for those struggling to pay down credit card debt is to consolidate with a 0% balance transfer card, Bankrate’s Rossman said.
“You could pay about $300 per month and knock out the average credit card balance in 21 months without owing any interest,” he said.
As it stands, 30% of credit cardholders expect to pay off their credit card debt within a year, while 41% expect to pay it off in 1 to 5 years, Bankrate also found. Another 13% expect it will take more than a decade.
The rally in bitcoin and other cryptocurrency prices has generated excitement among some investors, but investment advisors are largely still skeptical that those volatile assets belong in a 401(k) plan or other qualified retirement savings plans.
Crypto was one of the fastest-growing categories of exchange-traded funds in 2024. The most popular of these funds, the iShares Bitcoin Trust ETF (IBIT), has ballooned to over $50 billion in total assets.
Although crypto is a small part of the 401(k) plan market, it could grow substantially in 2025.
President-elect Donald Trump has suggested he will create a strategic reserve of bitcoin for the U.S. and has nominated Paul Atkins, a cryptocurrency advocate, to chair the Securities and Exchange Commission. The SEC’s approval of spot bitcoin and ethereum exchange-traded funds in 2024 was a key change for the industry.
The law covering 401(k) plans requires plan sponsors to act as fiduciaries, or in investors’ best interest, by considering the risk of loss and potential gains of investments. The Labor Department has cautioned fiduciaries to exercise “extreme care” before adding crypto options to a 401(k) plan’s core investments.
Labor Department officials, however, haven’t required fiduciaries to select and monitor all investment options, like those offered through self-directed brokerage windows, according to the Government Accountability Office. Nearly 40% of plans now offer brokerage windows in their 401(k) accounts, according to a 2023 survey by the Plan Sponsor Council of America.
Pros and cons of crypto in a 401(k) plan
Fernando Gutierrez-Juarez | Picture Alliance | Getty Images
Views are mixed about how much crypto to add to retirement savings or if it’s wise to allocate any at all.
Some financial advisors say crypto can work for a 401(k) plan because its movements are unconnected to the stock market and it functions even if a fiat currency is devalued.
“Crypto should be a part of a 401(k) plan because it’s a non-correlated alternative asset class,” said Ivory Johnson, a certified financial planner and founder of Delancey Wealth Management in Washington, D.C.
“With that said, investors need to ensure that they take their risk tolerance and time horizon into account which will define the target allocation,” said Johnson, who is also a member of the CNBC Financial Advisor Council. “The more volatile an asset class is, the less you need of it in the portfolio because you presumably get more bang for your buck.”
Johnson recommends cryptocurrencies range from 2% to 8% of an investor’s portfolio.
Other experts point to volatility and risk as reasons to be conservative.
“People saving for retirement should probably be even more conservative, because adding crypto to a 401(k) plan would significantly increase the risk that your retirement nest egg could suffer a large loss at the wrong time,” said Amy Arnott, a chartered financial analyst and portfolio strategist with Morningstar Research Services.
Morningstar found that since September 2015, bitcoin has been nearly five times as volatile as U.S. stocks, and ether nearly 10 times as volatile. That type of volatility adds a large risk to a portfolio even with a small amount invested.
401(k) contribution limits for 2025
Regardless of what assets are in a 401(k) plan, there are limits to how much you can contribute. For 2025, an employee can contribute up to $23,500 in a 401(k) and other employer-sponsored plans — that’s $500 more than in 2024.
People age 50 or older can make a “catch-up contribution” of up to $7,500. And those age 60 to 63 years old can supersize that, with a catch-up contribution of up to $11,250 for 2025.
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Why your take-home pay could be higher
If you’re starting 2025 with similar wages to 2024, your take-home pay — or compensation after taxes and benefit deductions — could be a little higher, depending on your withholdings, according to Long.
“When all the tax brackets go up, but your salary stays the same, relatively, that puts you on a lower rung of the ladder,” he said.
The federal income tax brackets show how much you owe on each part of your “taxable income,” which you calculate by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
“Even if you make a little more than last year, you could actually pay less in tax in 2025 compared to 2024,” because the standard deduction also increased, Long said.
For 2025, the standard deduction increases to $30,000 for married couples filing jointly, up from $29,200 in 2024. The tax break is also larger for single filers, who can claim $15,000 in 2025, a bump from $14,600.
‘It ends up nearly balancing out’
Despite tax bracket changes, many Americans won’t feel the pay increase amid elevated prices for certain expenses, said Sheneya Wilson, a CPA and founder of Fola Financial in New York.
“It ends up nearly balancing out,” she said.
While inflation is no longer accelerating, there was an uptick in the cost of groceries, gasoline and new cars in November, according to the Bureau of Labor Statistics.
Whether take-home pay is higher or lower than expected, it’s important to monitor your state and federal income tax withholdings throughout the year, especially during major income or life changes, Wilson said.
Typically, if you withhold too much from your paycheck, you can expect a refund, whereas not withholding enough often results in taxes owed.
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